Atmel in Colorado Springs devotes part of plant to touchscreen technology

For the first time since Atmel Corp. bought its Colorado Springs manufacturing plant 24 years ago, the San Jose, Calif.-based company is producing a product other than semiconductors here that could give the 40-year-old facility a bright future.
This year, Atmel began producing a product...

For the first time since Atmel Corp. bought its Colorado Springs manufacturing plant 24 years ago, the San Jose, Calif.-based company is producing a product other than semiconductors here that could give the 40-year-old facility a bright future.

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This year, Atmel began producing a product designed to be used in smartphones, tablet computers and other devices with a touchscreen.

The new product line, called XSense, is a thin film imprinted with ink that contains copper and can conduct electricity.

Though XSense takes up a small amount of the space in Atmel's 500,000-square-foot plant today, the company said it expects production to expand enough to support $100 million in annual sales by the end of the month.

The plant has enough space to triple production of XSense next year, which would likely require adding to Atmel's 1,300-person Colorado Springs workforce, Shahin Sharifzadeh, Atmel's senior vice president of worldwide operations, said last month during a briefing on the product and tour of the plant.

That would be a major turnaround for Atmel, which laid off 200 permanent and temporary workers from the plant a year ago, blaming weak economic conditions for an industry downturn that began in early 2011.

XSense is "one of the most exciting things to happen to this plant in the last three to five years. XSense and the products we are already running here are the future of this plant," Sharifzadeh said. "We have the capacity to expand to three times the production we will reach by the end of the year. After that, we need to see what demand is. If acceptance is as good as we anticipate, there should be (good) growth potential."

Atmel began producing XSense this year in the plant, its only manufacturing facility, and began volume production in the past few weeks. The company began developing the technology in 2010 and won approval last year for $339,070 tax rebates from the Colorado Springs City Council for spending $25 million on manufacturing equipment and other capital projects planned by 2015, at least in part to launch the XSense product line, said Bob Cope, principal analyst in the city's Economic Development Division.

David White, chief business development officer for the Colorado Springs Regional Business Alliance, called XSense "an innovative product that will extend the life of (Atmel's) plant for the foreseeable future. This is great news for both Colorado Springs and Atmel. This product will be a hot commodity for the next several years."

Taiwanese computer manufacturer ASUS became the first this year to incorporate XSense into a product, its 7-inch MeMO Pad tablet computer. Hewlett-Packard introduced a 10-inch Omni tablet that uses XSense last week and Atmel told stock analysts last month that it will soon begin generating sales from products made by other manufacturers that it did not identify.

Sharifzadeh said XSense is being used in a smartphone with a 3.2-inch screen and tablet computers with 6-, 7- and 10-inch screens and that it could be used in a laptop computer with a screen of up to 15.6 inches.

Most of Atmel's $1.4 billion in annual revenue comes from manufacturing and selling microcontrollers - tiny computers on a chip used in the industrial, consumer, communications, computing, automotive and other industries - and other specialty semiconductors. Half of the company's chips are made in the Colorado Springs plant and the rest are produced by four independent contract manufacturers in South Korea and Taiwan. The company lost $29.3 million on sales totaling $1.07 billion in the first three quarters of the year.

XSense represents a major diversification for Atmel, moving into products that sell for two to four times as much as its microcontrollers and specialty semiconductors - $2 to $25 for each unit, depending on the size of the screen on the device where it will be installed.

The product line is expected to produce $10 million to $15 million in revenue this year. Atmel CEO Steve Laub estimated in May that the market for XSense and other touchscreen sensors at nearly $5 billion.

Much of the market for XSense will come from displacing technology now used in most smartphones, tablets and other touchscreen devices. That technology, called indium tin oxide, is applied as a grid of transparent metal under glass that is brittle, difficult to manufacture in large screens and uses a rare-earth metal called indium that is expensive and in short supply. Because XSense uses film instead of glass, it is flexible and can be used on curved surfaces, including wearable computing devices.

"Space in mobile devices is at a premium. Manufacturers are looking to make their devices thinner, lighter and faster," said Jalil Shikh, vice president and general manager of Atmel's touch material product line. "XSense offers thinner, lighter, faster and cheaper. We have cutting-edge technology that can be used in a flexible form (can be folded or bent) and high performance. This technology totally revolutionizes the way we go forward. If companies don't adopt the new technology, they will be left behind."

Atmel makes the displays using a thin layer of film made by British plastics manufacturer Carlco Plc, then applies the circuit design to the film and next deposits ink containing copper to form the mesh grid that senses when a user is touching a particular area of a touchscreen. The rest of the manufacturing process includes sending the film through a bath of chemicals for conditioning, adding a protective layer and then testing each sensor before it is shipped to the mobile device manufacturer.

Jennifer Colegrove, who owns Touch Display Research in Santa Clara, Calif., and attended last month's briefing, estimates the potential market for XSense and similar technologies will grow from $200 million this year to $4 billion by 2020, mostly for tablet computers and other larger mobile devices. Primary competitors in the touchscreen sensor market include Japanese industrial giant Fujifilm and Texas-based Uni-Pixel Inc., but also includes about 180 other companies.

Craig Hettenbach, a technology analyst for Morgan Stanley & Co. LLC, estimated in October that Atmel could capture as much as 25 percent of the market for sensors in touchscreens 9 inches and larger within three years, representing $250 million in annual sales. He cites Uni-Pixel, which expects to have a plant in New York producing sensors by year-end, and Cambrios Technologies Corp., a California company that sells inks that transmit electronic signals, as Atmel's primary competitors in touchscreen sensor market.

Hans Mosesmann, a technology analyst for Raymond James & Associates Inc. who also attended the briefing, forecasts that the market for touchscreen sensors will grow at an annual rate of 44 percent during the next three years to about $10 billion due to its lower cost, size and performance.